Posted by AzBlueMeanie:
Jon Perr has an excellent post on how not all deficits are created equal. "Simply put, Republicans embraced massive deficits during times of prosperity, while Democrats turned to deficit spending to fight the recessions and economic hardship the GOP helped produce." PERRspectives: Republican Deficits vs. Democratic Deficits:
That's the record of the past generation. Under Republican leadership, economic common sense was upended. The national debt tripled under Ronald Reagan and, after the budget surpluses of the later Clinton years, doubled again under George W. Bush. As analyses from the Center on Budget and Policy Priorities show, the Bush tax cuts accounted for almost half the mushrooming deficits during the last decade and, if made permanent, over the next 10 years would produce more red ink over than two wars, TARP, the Obama stimulus package and the revenue lost to the recession combined.
That Republican "debt orgy," as Senator Sheldon Whitehouse (D-RI) aptly labeled it, largely served to produce a massive transfer of wealth to the richest Americans needing it least. (That perverse development is reflected in "the Bush 400", the richest 400 taxpayers in the United States who saw their incomes double and tax rates halved between 2001 and 2007.) As the New York Times' David Leonhardt noted last year, that windfall for the wealthy, the Medicare prescription program, and the wars in Afghanistan and Iraq were never paid for:
"President Obama's agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying…
The economic growth under George W. Bush did not generate nearly enough tax revenue to pay for his agenda, which included tax cuts, the Iraq war, and Medicare prescription drug coverage."
For House Minority Leader John Boehner, who voted for all of it, the answer isn't a return to the moderately higher tax rates of the prosperous Clinton years, but slashng Social Security. As he told the Pittsburgh Tribune Review, Boehner not only supports raising the retirement age over time (a suggestion offered by many in both parties), but means-testing the universal retirement program:
"We need to look at the American people and explain to them that we're broke," Boehner said. "If you have substantial non-Social Security income while you're retired, why are we paying you at a time when we're broke? We just need to be honest with people."
Last fall, former Reagan Treasury official Bruce Bartlett offered just that kind of honesty to the born again deficit virgins of his Republican Party. Noting that the FY2009 deficit of $1.4 trillion was solely due to lower tax revenues and not increased spending, Bartlett concluded:
"I think there are grounds on which to criticize the Obama administration's anti-recession actions. But spending too much is not one of them. Indeed, based on this analysis, it is pretty obvious that spending – real spending on things like public works – has been grossly inadequate. The idea that Reagan-style tax cuts would have done anything is just nuts."
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While highlighting the growing contributions that Social Security, Medicare, and mandated health care programs will make to the debt picture, [CBO Director Doug] Elmendorf painted a dismal picture of an "alternative fiscal scenario" in which "most of the provisions of the 2001 and 2003 tax cuts would be extended."
Under that combination of policy assumptions, federal debt would grow much more rapidly than under the extended-baseline scenario. With significantly lower revenues and higher outlays, debt would reach 87 percent of GDP by 2020, CBO projects. After that, the growing imbalance between revenues and noninterest spending, combined with spiraling interest payments, would swiftly push debt to unsustainable levels. Debt as a share of GDP would exceed its historical peak of 109 percent by 2025 and would reach 185 percent in 2035.
As Ezra Klein and Matthew Yglesias suggest, the CBO's latest forecast makes clear that the very worst thing the Congress could do to trim the deficit is make the expiriing Bush tax cuts permanent:
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With the economy here growing slowly and poised to shed jobs in June (even with, as Leonhardt charted today, some promising signs), the United States simply can't afford to slam the brakes on the recovery. As Franklin Roosevelt's painful second-term experience showed ("From 1936 to 1938, when the Roosevelt administration believed that the Great Depression was largely over, tax increases and spending declines combined to equal 5 percent of gross domestic product"), this is not the time to shut off the spigot of federal stimulus. Not now, not yet.